New power plants need to be built in the United States or else the country will literally run out of power, perhaps in the next 10 years.
That was the message Michael Morris, CEO of American Electric Power, brought to a meeting at the University of Tulsa last week. His trip to Oklahoma was part of a so-called listening tour aimed at bringing Morris in contact with university students across AEP’s service territory.
He said that with a growth rate of 1 to 2 percent a year, a company AEP’s size needs to add a new centralized power station every couple of years.
He said AEP probably will build a new nuclear power plant, but as part of the “second wave” of nuclear construction. Aside from Tennessee Valley Authority’s Watts Bar unit, which could come online in 2010, the next new nuclear power plant may not enter commercial operation before 2020. That’s later than the 2015-2017 target given by several potential developers. It reflects Morris’ expectation that lawsuits challenging any license the Nuclear Regulatory Commission may issue will delay construction.
“We’re taking all the arrows on coal,” Morris said. “We’ll let someone else take the arrows on nuclear.”
AEP derives 68 percent of its electric generation from coal-fired power plants. With a plentiful supply of coal in the United States, along with the likelihood that countries such as China, India and Russia will likely continue to burn coal for years, Morris said that coal needs to remain a part of the power generation mix.
Morris said that on a recent visit to AEP’s coal terminal in New Orleans, he saw Powder River Basin coal being loaded onto ships for export to China. Morris said the recent uptick in coal exports is having an effect on electricity prices. AEP and others may be insulated somewhat due to the nature of long-term coal supply contracts. Last year the company bought 80 million tons of coal for around $30 a ton, or roughly $1.27/MMBtu. This year, coal costs may rise to $40 a ton, or around $1.45/MMBtu. By 2020, the company’s highest cost coal could be on the order of $50 to $60 a ton.
Morris dismissed the idea that natural gas should be used for baseload power generation, citing supply and price forecasts. He said that where 15 to 20 countries currently have natural gas reserves, that number is forecast to shrink to five in 20 years. And by 2040, Russia and the Middle East could be the only two regions with remaining natural gas reserves.
He said the United States currently consumes 22 trillion cubic feet of natural gas a year and produces 18 Tcf. “Without Canada we would be entirely upside down on gas,” he said. What’s more, the United States is unlikely to prevail in global markets for liquefied natural gas supplies. “I don’t see us winning the battle with China and Japan on LNG.”
Turning to wind and solar sources, Morris said that both are currently inefficient from an electrical and an economic standpoint. Both, however, are also environmentally efficient as well as “politically required.” He said he favors state-by-state approaches to renewable portfolio standards and called for more storage to help make wind and solar resources more electrically efficient.